Pricing Basket Options by Polynomial Approximations

Figure 4

Prices of a spread contract with log-return volatilities between 10% and 50% under the benchmark parametric set. (c) Difference between prices obtained for both methods. We consider, without loss of generality, the case .

(a) Price computed by a Monte Carlo approach,

(b) Price computed by a Chebyshev expansion, order 15

(c) Difference of prices between Monte Carlo and Chebyshev